Inter Company Services Agreement Template for Pakistan

An Inter Company Services Agreement is a legally binding contract that governs service arrangements between related companies within a corporate group operating in Pakistan. This document ensures that service transactions between affiliated entities comply with Pakistani corporate law, tax regulations, and transfer pricing requirements while maintaining proper documentation for regulatory purposes.

When do you need this document?

You need an Inter Company Services Agreement when your company provides or receives services from related entities within your corporate group. This includes situations where your parent company provides management services to subsidiaries, when shared service centers offer IT or administrative support across group companies, or when technical expertise is transferred between affiliated entities. The agreement becomes essential for multinational corporations operating in Pakistan, holding companies managing multiple subsidiaries, and any corporate structure where services are shared between related parties. Pakistani tax authorities require proper documentation of inter-company transactions, making this agreement crucial for compliance during tax audits and transfer pricing assessments.

Key legal considerations

Several critical legal elements must be addressed in your Inter Company Services Agreement. The scope of services clause should detail specific services, performance standards, and delivery timelines to avoid disputes and ensure clarity. Payment terms must establish arm's length pricing that complies with Pakistan's transfer pricing regulations, including appropriate benchmarking studies where required. Termination provisions should specify notice periods, transition arrangements, and post-termination obligations. The agreement must include proper invoicing procedures, currency specifications for cross-border transactions, and withholding tax obligations. Intellectual property clauses should address ownership and usage rights of any proprietary information or technology shared during service delivery. Additionally, confidentiality provisions must protect sensitive business information exchanged between the parties.

Legal requirements in Pakistan

Pakistani law imposes specific requirements on inter-company service agreements that you must carefully observe. Under the Companies Act 2017, all material transactions between related companies must be properly documented and may require board approval or shareholder consent depending on transaction value. The Income Tax Ordinance 2001 and Transfer Pricing Rules 2017 mandate that inter-company pricing must reflect arm's length standards, requiring economic analysis and documentation to support pricing decisions. Sales Tax Act 1990 may apply to certain services, requiring proper registration and tax collection procedures. For cross-border transactions, the Foreign Exchange Regulation Act 1947 governs payment procedures and requires compliance with State Bank of Pakistan regulations. The agreement must also address employment law implications if personnel are shared between companies. Regular review and updates of pricing benchmarks are necessary to maintain ongoing compliance with evolving transfer pricing regulations.